Market News - Heroes and Villains of the Stock World by EasyMarket 09/09/2016
As the cliché goes, “Money makes the world go ‘round” and this has been particularly evident in the stock market world. While some were able to use the fame and fortune for good, others were simply lured by the glitz and glamor to feed their greed. Here are some of the heroes and villains in the stock world.
If this name sounds familiar to you, then you have likely watched or read “The Wolf of Wall Street.” Jordan Belfort started his trading career as a stockbroker at L.F. Rothschild where he had a taste of the luxurious lifestyle and began craving more. He soon founded the firm Stratton Oakmont which he ran as a “boiler room” of sorts, marketing penny stocks and illiquid securities to unwitting investors.
According to investigators, Belfort and his traders engaged in “pump and dump” schemes that defrauded investors. In 1998, Stratton Oakmont was shut down by authorities and Belfort was charged with 22 months in prison. He also had to pay $110.4 million in fines and fees.
Martin Shkreli is infamously known for his role in Turing Pharmaceuticals’ 5,556% price hike for Daraprim, an antiparasitic drug used in the treatment of toxoplasmosis. He was referred by the media as “The Most Hated Man in America” and was indicated on several charges of securities fraud.
Shkreli was knowledgeable in the biotech sector, profiting from shorting shares of companies ahead of significant price drops. He founded Turing Pharmaceuticals in 2015, obtaining licenses from out-of-patent medicines and reevaluating pricing strategies, including that of Daraprim. The massive price increase was widely criticized, even by presidential candidates Hillary Clinton, Bernie Sanders, and Donald Trump.
Jesse Livermore is often called Boy Plunger or the Great Bear of Wall Street, known for making and losing millions of dollars in short-selling stocks during the market crashes of 1907 and 1929. Early in his trading career, he put money in bucket shops which takes bets on stock markets without actually holding or selling the assets.
Livermore was known for simply playing his hunches, shorting Union Pacific railroad right before the 1906 San Francisco earthquake. However, he lost a huge part of his fortune, with some blaming his lack of adherence to his own trading rules as the main reason for his losses.
In 1934, following a divorce from his then-wife Dorothy, Livermore was essentially bankrupt and was suspended as a member of the Chicago Board of Trade. In 1940, he shot himself in an apparent suicide in the cloakroom of a hotel in Manhattan.
Of course, who could forget the infamous Bernie Madoff and his Ponzi scheme? Madoff actually started his firm to trade penny stocks on behalf of investors before eventually becoming one of the biggest market makers on Wall Street.
He later on delved into asset management, creating hedge funds known as “Jewish Bond” and consistently making above average gains. As soon as investigators got curious on how these gains were being made, it was revealed that the asset management strategy was one big lie and that it was part of the largest and longest running Ponzi scheme in history. In 2009, Madoff was charged with 11 federal felonies and was given a 150-year prison sentence.
John Rigas is the founder of Adelphia, one of the biggest cable providers in the 90s. Rigas made use of this company to make acquisitions and it wasn’t long before he and his family members started taking the funds for themselves. Similar to the strategy used by Enron to hide liabilities, the family used off-sheet special purpose vehicles to rake in $100 million and conceal more than $2 million in debt.
Once this was exposed, Adelphia was acquired by Comcast for a tiny sum. Rigas and his sons were charged with bank fraud, wire fraud, and securities fraud, earning him 15 years in federal prison.
On the other side of the coin, we’ve got the all-time greats like Warren Buffet who is one of the richest self-made billionaires in town. Buffet is known as the “Oracle of Omaha” and is still considered the world’s greatest investor to-date.
He has decades’ worth of success in the stock markets under his belt and is consistently ranked as one of the world’s wealthiest people. What’s admirable about Buffet is that he makes use of this wealth to support various charitable and humanitarian causes, pledging majority of his wealth to the Bill & Melinda Gates Foundation.
Another famous stock market hero is Carl Icahn, who is the founder and majority shareholder of Icahn Enterprises. He began his career on Wall Street as a stockbroker, later on creating his own firm to focus on risk arbitrage and options trading. He has also taken controlling positions on the likes of Texaco, Philips Petroleum, Viacom, Marvel Comics, Motorola, and Netflix.
Icahn is also involved in philanthropy, making substantial donations to schools and rescue funds. He has also made contributions in improving education, earning him several awards. Icahn is also a known supporter of Donald Trump.
Although not necessarily a stock trader per se, Harold Simmons is more of an investor and is also considered a hero in the stock and business world for his introduction of the leveraged buyout (LBO) strategy. With this strategy, one can buy majority of the company’s stock so that you are its main stockholder.
He launched his career as an investor with his purchase of a small drugstore and parlayed it into a chain of 100 stores. He developed an “all debt and no equity” style of capital management after observing bank operations.
Last but certainly not least is Peter Lynch, who is considered a legend in the stock trading industry. He started off as an intern in Fidelity Investments before eventually becoming the manager of its Magellan Fund and averaging a 29.2% annual return in 1977 to 1990. He is the man behind the phrase “ten bagger” in a financial context wherein an investment becomes ten times worth its original purchase price. His investment philosophy of is simple: Invest in what you know. He has also focused on philanthropy, also viewing this as a form of investment.